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Don't Worry, Janet Yellen Says the Financial System is Still Orderly

Treasury Secretary Janet Yellen tried to comfort the markets today. Her comments appear to have been counterproductive.
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Who Is Janet Yellen

Everything Under Control

The financial system is still orderly according to Treasury Secretary Janet Yellen in prepared remarks before the US Senate Committee on Banking.

"The U.S. financial system has continued to function in an orderly manner, though valuations of some assets remain high compared with historical values," said Yellen

In other remarks, Yellen noted "potential for continued volatility and unevenness of global growth as countries continue to grapple with the pandemic." 

And "Russia's unprovoked invasion of Ukraine has further increased economic uncertainty."

Increased Uncertainty 

Are Yellen's comments a relief or an official denial that things are becoming unglued?

At a minimum, it appears there is increased uncertainty about things being "under control".

What likely roiled the markets were her accurate comments "valuations of some assets remain high compared with historical values."

The Fed and the US Treasury should have been concerned about that at least four years ago, and arguably since its massive QE programs began.

Unevenness of Global Growth

But don't worry. Despite the "unevenness of global growth", monitoring is still ongoing. Phew!

Question of the Day: What happens when "unevenness of global growth" morphs into ""unevenness of global recession"?

Perish the thought. Bloomberg reports Yellen Sees Solid Growth, Possible ‘Soft Landing’ for U.S. Economy

Possibility of Soft Landing 

Something does not quite add up.

How is it that we will have "solid growth" but only a "possibility" of a soft landing?

Let's not worry about my last question either because Fed Chair Jerome Powell confidently predicts a soft landing or at least something "relatively" soft. 

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Unfortunately, Powell did not provide a definition of "relatively". Hopefully, the Great Depression is not his model.

What's the Base Case?

We need soft landing confirmation from the ECB and I happen to have it. 

ECB President Christine Lagarde says "Stagflation Isn’t the Base Case." 

What then? Depression? Great Recession #2? 

My base case:  An Official Denial Suggests Stagflation is Now the Base Case for Europe

For her comments, I gave Lagarde my "Hoot of the Day" award. 

What About the US?

Stagflation is the base case for the US too.

For discussion, Check Out Delusional Fed President Neel Kashkari, Even Worse Than Powell

Central bank presidents are on a roll.

In case you missed it, please see Stocks, Gold, Oil, Rip Higher as Dovish Powell Wins Hoot of the Day Award

Just one day later, I commented Bond Massacre Continues and the Fed Dove Rally Fails Already

Despite my sarcastic comments, the stock market decline, including today, has been orderly as far as normal bear markets go.

However, it's clear the Fed, the US Treasury, and the ECB are starting to worry things might not stay orderly for long.

This post originated at MishTalk.Com.

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